SoftBank Offloads Alibaba Shares to Raise $34 Billion as ‘Unicorn Winter’ Inflicts Heavy Losses

Masayoshi Son-led SoftBank Group on Wednesday revealed plans to sell nearly 242 million American depository receipts (ADRs) of Chinese behemoth Alibaba, that will help it gain 4.6 trillion yen ($34 billion) in pre-tax gain from the sale.

The Japanese giant, which saw massive losses in billions of dollars in the past two quarters this year, said that sale will trim its stake in Alibaba to 14.6 per cent, a decrease from 23.7 per cent at the end of June.

“The current equity market environment is challenging and may be prolonged. Considering the said market environment, “SBG (SoftBank Group Corp) has determined that the best option at this time is to settle these prepaid forward contracts in physical form,” said the company, adding that this “will further strengthen our defense against the severe market environment”.

Softbank made its first investment in Alibaba in 2000 – around $20 million — and has since developed a close relationship with the company over the years.

Earlier this year, investment bank Jefferies predicted that SoftBank would need “$40 billion-45 billion of cash this year” if it were to sustain.

SoftBank recorded net loss of 5.3 trillion yen (nearly $40 billion) in total for the first six months of the year.

Unicorn Winter

Earlier this week, Son, Founder and CEO of Softbank, warned unicorns and startups to prepare for a harsh and longer funding winter ahead, as the company posted disastrous results for the second straight quarter this year.

In the earnings call after reporting $23.4 billion net loss in the June quarter, Son said that unicorn leaders “still believe in their valuations and they wouldn’t accept that they may have to see their valuations go lower than they think”.

The winter for publicly-listed companies is still continuing, but a similar downturn for startups may last “longer,” warned the 64-year-old executive.

The conglomerate earlier reported net loss at $16.2 billion for its January-March quarter this year.

SoftBank’s Vision Fund investment unit alone reported a net loss of nearly $21 billion.